Does ‘the Cloud’ Have a Silver Lining for the Poor? New Sources of E-Transaction Data Hold Promise

Does 'the Cloud' Have a Silver Lining for the Poor? New Sources of E-Transaction Data Hold Promise

Authored by: Jake Kendall

Can new sources of electronic transactional data improve financial services for the poor?

Financial services companies in wealthy nations depend heavily on data to design their products, segment the market, and tailor individual products to individual consumers. A very basic example is using credit scores, derived from past financial history, to set interest rates and target credit offerings. More advanced approaches use customer-level analytics that identify customer life events (births, moves, entering school, receiving a bonus, etc.) to sell financial services offerings.

To date, this data-driven approach has been largely impossible for any banks that would pursue it with populations at the bottom of the economic pyramid. Most of the poor use informal cash-based financial services and have no formal relationships (not even regular utility bill payments) and thus have no financial data to mine.

In a previous post, I alluded to the idea that mobile money systems are platforms over which a lot of financial and non-financial services can flow. A major benefit is that these systems take cash handling costs out of the system. Another potential benefit (still somewhat theoretical at this point) is that clients will create a financial history, and a useful (and valuable) trove of data for financial service providers.

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